The Texas oil and gas industry marked another milestone in its long climb back from the multi-year price collapse, and the added production is helping to "frustrate" OPEC as it tries to prop up oil prices, an energy economist said.
Led by higher oil and gas prices and ramped-up oil production, the Texas Petro Index posted its fifth-straight monthly gain in April, to 164.8. The April figure, up from 160.4 in March, marked the first year-over-year increase in 27 months.
The index, or TPI, draws from a combination of price, production, permitting and employment data to give a reading of the health of the Texas oil and gas industry. A 100 on the TPI would represent a level of economic activity equivalent to when the index was started in 1995. The high point for the TPI was 313.5 in November 2014.
Among the positives for the state's producers were an increase in crude oil production of 2.3% over April 2016, to 99.55 million barrels. Economist Karr Ingham, who created the TPI, said the average price of $47.62/bbl in April gave Texas-produced oil a value of nearly $4.7 billion, nearly 28% higher than in April 2016.
Natural gas production in April came to 651.8 Bcf, 4.5% less than a year earlier. With an average price of $2.95/Mcf, however, the value of the gas produced was up more than 44%, to $1.92 billion.
Other advances included a significant spike in rig count: There were an average of 425 working rigs in the state during April, up nearly 117% from April 2016. Permitting also jumped, increasing by about one-third from 683 in April 2016 to 909.
Ingham said the jump in Texas production has done a great deal to curtail any price increases from OPEC's production cutbacks, as the state has largely filled the production void.
"Texas producers are responding to higher wellhead prices that have resulted from coordinated efforts by OPEC, Russia, and others to curtail oil production," he said. "But in large part, production growth in Texas and the U.S. is keeping a lid on crude oil prices, which continues to frustrate parties to that agreement."
Ingham said crude oil exports from the U.S. are averaging 1.3 MMbbl/d, which nearly equals the OPEC cutbacks. "Producers in Texas and across the U.S. will gladly take the market share given up by nations that attempt to manage oil markets and prices by centralized decisions to manipulate production," he said.